Can Prizes Change the World?

CPCW

An interview with Eileen Bartholemew, Vice President of Prize Development at the X Prize Foundation.

For most of history…” notes Rachael King, “the thrill of solving life’s thorny problems has provided ample incentive for inventors. Yet the promise of fortune and fame doesn’t hurt. Over the past few centuries, governments and private interests have sought to enlist innovators and entrepreneurs against specific challenges by offering prizes with financial bounties.” (Bloomberg Business Week, 2008).

The British Government’s ‘Longitude Prize’ (1714) was responsible for one of the most important navigation tools in history (the precursor to the modern chronometer).  The French Academy of Sciences ‘Alkali Prize’ (1775) created one of the most important industrial-chemical processes of the 19th century and Napoleon’s Food Preservation Prize (1795) created the fundamentals of a food preservation method that is still used today.  Even in more recent history we saw the Orteig Prize (1919) for the first transatlantic flight, which spurred the world travel industry and the multitude of innovation prizes we have today including the Ansari X-Prize which offered US$10 million to the first non-government team to launch a reusable manned spacecraft into space twice within two weeks (a feat which had taken governments decades and billions of dollars to otherwise achieve).

To learn more about the role of prizes in innovation, I spoke to Eileen Bartholemew – Vice President of Prize Development at the X Prize Foundation who (in their own words) are, “…an innovation engine. A facilitator of exponential change. A catalyst for the benefit of humanity….”  Since their founding in 1995, the X-Prize foundation has facilitated oil recovery cleanup at triple the standard rate. Enabled the creation of a 135 MPGe energy-efficient car. And helped launch a $1.5 billion private space industry.

 

Q: How can prizes and competitions spur innovation?

[Eileen Bartholemew] Prizes are not new.  There are records of prizes in Greek literature, in the Bible and many other places- they’ve been around for millennia.  During the 1700’s there was a ‘renaissance‘ in prizes when governments rediscovered the prize model to deal with the innovation challenges they had at the time.    When the X-Prize burst on the scene- in reality we were taking a very old model and applying it in a new context, and in a new era.

There are several things about prizes that make them unique in terms of how they spur innovation.  One of them is putting the spotlight on unexpected talent.  That’s a unique component of prizes- traditional ways of financing innovation; government grants, equity markets and investment, tend to reward the known rather than the unknown.  One of the unique aspects of a prize, and particularly an X-Prize (which is for a specific measurable goal) is that it doesn’t require letters after your name, specific degrees or backgrounds or so on.  We simply define what it is we want solved, and award the prize to whomever is able to accomplish that.  The idea of identifying new talent is one of the major levers of how prizes spur innovation.

Secondly, prizes provide legitimacy and definition to specific problems.  Before the Ansari X-Prize for example, lots of people had invested money in private commercial attempts for space flight and space travel.  It was always looked on as kind-of-a-scam as people felt that NASA and governments had already done that, so why should the private sector get involved.   A lot of people had also lost a lot of money in these endeavours and so raising capital was hard as people saw these past failures.  When you put a prize out there, you legitimise the pursuit of something which is often pretty audacious.  Legitimacy also brings about renewed focus and vigour on the problem at hand- it’s a little like the context of a 4 minute mile… nobody thought it was possible until it was achieved.  Typically people think innovation happens out in the open, outside the box and without constraints.   We’ve found that innovation really happens when you constrain a problem very specifically and then throw it out to the world to solve.   It’s a slightly different way of thinking.

Q: How are teams (and prizes) funded?

[Eileen Bartholemew] This is something which is often puzzling for newcomers to the prize field… why would someone possibly spend more than the money you’re giving away to pursue the opportunity? it doesn’t inherently make sense.

When an X-Prize is launched, we aim to address one of the grand-challenges of humanity.  The end of an X-Prize is the beginning of a new market, or a new market opportunity.  It may be a changed industry or a changed opportunity.  We are nothing more than a distinct channel to that market.  When people look at a problem or an opportunity, they have a natural ‘investment threshold’ in their minds- feeling they need a certain amount of return or investment to make it worth their while.  To reach a market you have a number of channels and both market and non-market incentives.  Market incentives are things like venture capital and equity investment… non-market incentives are things like government R&D that may step-in to support efforts in a space.  There is a gap.  Often-times those incentives don’t help the investor or innovator cross the threshold to get to what the market requires.  Prizes step in to fill that gap, unlocking opportunities.  The Ansari X-Prize is a great example of this. The $10 million reward pales in comparison to the multi-billion dollar potential in the private space-flight industry.  Many of the companies in these industry attempted and- of course one won- the X-Prize.

If you look at other prizes and components of prizes, you also see additional value for competitors beyond just the purse.  There’s an element of fame and glory to competitions, and awareness, insight and enthusiasm.  There is also underlying this, the basic human nature to compete and push the edges.  Prizes feed the human soul in that regard.

In many cases there’s legitimacy and value brought to the problem at hand, that has value to the enterprises, organisations and teams who are participating.  In many cases, the prize itself becomes a testing ground or proving forum which they may not otherwise get access to.  An example of this is the Wendy Schmidt Oil Cleanup X-Challenge.  This was a challenge to improve the efficiency and capabilities of surface oil cleanup.  To test technologies in the field, you can’t just walk out to a pristine ocean- dump some oil- and test.  There are only a few places in the world you can do it, one of which is suburban New Jersey (Ohmsett).  For the purposes of our competition, we rented out these facilities for teams to test their technologies- thus legitimising their pursuits in a way they couldn’t do so on their own.  Even the individuals who don’t ultimately win the prize-purse benefit from the opportunities provided by this approach.

Looking at the philanthropic aspects… There’s a lot of new wealth that exists today through the rise of the connected economy.  The individuals who are looking to turn that wealth to philanthropic pursuits are used to seeing phenomenal returns on their investments.  When they made their fortunes, and invested their dollars, they wanted to see significant returns.  That capital then turns around to look at their choices of philanthropic endeavours- and in many instances typical philanthropies simply do not provide that kind of return.  For every dollar you invest, you are lucky if some small portion actually goes to the end-mission of that organisation.  Certainly, you would never exceed the value you put in.  One of the unique aspects of a prize is that when you put a dollar up in a prize purse, you’re incentivising teams around the world to spend many times that dollar in pursuit of the competition.  You are leveraging dollars in a completely different way- in a philanthropic pursuit. Rather than getting 10c on your dollar, you are getting 10, 50-100x or more return on your philanthropic dollar.   This makes prize-philanthropy attractive to the new wealth that has been created in the last decade, and continues to grow.

Q: How do you choose the categories in which you create prizes?

[Eileen Bartholemew] The mission of the X-Prize is to try and take a really big-bite out of humanity’s challenges.  We try to operate in a lot of different spaces, and have plans for many prizes we intend to launch in the coming months and years.

Let me look at some examples of what we’re working on now, and what keeps us up at night…  Life sciences is a great sector.  Right now we’re tackling the challenge of Alzheimers, we’re looking at bringing about investments and change in health informatics and big-data (genetic data, socio-economic data, wearable technology data and so on…).  We’re also looking at issues around healthy ageing and living- for example, organo-genesis where organs can be grown to extend the quality and length of human life.  We are also looking at pure technology plays such as robotics, and how those technologies can help us live our lives better such as helping the elderly or carrying out menial tasks.

In the field of learning, we’re taking on the challenge of global literacy.  Right now there’s about 800 million people around the world who are not literate.  Many are children, and most – in fact- girls.   We can’t build enough schools, or train enough teachers, to make a significant dent in that.  We have to attack the problem in a different and more scalable way.  There have been demonstrations of how technology can help improve educational skills, and we think it can also be applied to basic components of literacy, reading and writing, mathematics and more.  New literacy skills such as coding are also emerging, and are relevant for the jobs and economy of the 21st, 22nd, 23rd and 24th centuries.  We want to create scalable ways for individuals to become literate, and develop the skills they need to compete for jobs in the future.

Q: How do you define a ‘great challenge‘ to humanity?

[Eileen Bartholemew] Let me use the example again of life sciences (although we apply the same techniques to any field).  If you start by drawing a big circle around healthcare and life sciences, you could say ‘those are all the challenges that exist in healthcare and life sciences…‘  you could then put a lot of smart brains together and somehow quantify that…

There is a subset of those challenges where prizes can make an impact.  Just because you have a hammer, not everything is a nail!  There are some aspects of humanity where prizes are not suitable- things like serendipitous discoveries… and things that are better aligned toward traditional mechanisms of innovation such as government grants.  Prizes step in where some basic technologies have already matured.  We work really well at combining disciplines, and things that exist today- but which have not been applied individually or in combination to a new set of problems or issues.

If you look at the circle of all challenges in life-sciences, there is a subset which can be addressed by prizes- you could say 10-40%.  Within that circle there is yet-another sub-set… the problems and challenges which X-Prize models can fix.   We are one of at least 5 prize types out there.  We have requirements on measurability, marketing, promotion, storytelling and so on.  We look through a very specific lens, and assess grand challenges like this.

Q: What are the applications of the X-Prize model in other environments (such as education, corporate and not for profit sectors)?

[Eileen Bartholemew] We’re seeing a huge surge in people considering prizes as an alternate means to solve a problem.  The US government, European Commission and a few others are considering using prize models.  It’s interesting that in the political realm, prizes put the onus on the problem and not on political parties in power.  It’s a very attractive model for governments.

In the case of corporations, people have come to learn that some of the smartest people in the world probably aren’t working for them.  There is always someone else- who isn’t working for you- who could help bring-about a solution to a problem you may have.. and you cannot feasibly employ everyone on the globe!  With the prize model, you can tap into pools of talent outside your department, company or even industry.  It’s a safe, measurable and definable way of bringing about innovation and solving problems.  You are seeing this increasingly with businesses such as 99designs and Kickstarter which, for example, raised more money than the National Endowment for the Arts in the United States.  The lever is changing in such a way that many will be taken by surprise.

A lot of the lower hanging fruit problems have been solved, or are in the process of being solved.  We are moving into a world of 2nd and 3rd tier problems which are either hard or very hard.  What that means is that a small group of individuals, or one individual- is probably not capable of solving those multi-faceted, multi-variable problems.  By creating platforms that allow collaboration and competition to co-exist- allowing that sometimes messy insight to appear.    These platforms are reaching into larger, cross disciplinary and global skills sets.

Q: What have been the greatest success stories from the X-Prize journey?

[Eileen Bartholemew] The catalyst prize for us that really brought about change in how people saw prizes, and understood what they were capable of- was the Ansari X-Prize.

I think our best opportunities still lie ahead.  I look at competitions we are launching later this year and into next year.  One of them concerns the advancement of our understanding of oceans.  The Wendy Schmidt X-Prize will advance our knowledge of ocean sensing, it’s a new frontier and we have to understand them to make sense of our environment, food supply and even explorations off the planet.

We also want to advance the human species itself in terms of what we learn, how we learn and how that all happens.  We think that our prizes in literature and education will bring about tremendous positive changes in how millions lead their daily lives.

There are a lot of problems to solve, but we’ve inspired people to think different, and tackle audacious goals.

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As a 2009 report from McKinsey & Company identified, prizes have a number of distinct attributes allowing them to become truly powerful instruments.

  • Expressiveness:Prizes embody aspirations, priorities, values, and a commitment to desired changes.  Well designed prizes carry a strong element of theatre that makes them newsworthy and media friendly…
  • Flexibility:Prizes inspire people and teams to push their efforts beyond conventional limits.  Freed from an overreliance on narrowly commercial incentives, competitors can turn their efforts to addressing issues that the market may overlook.” – a great example of this is the Rice BPC (the world’s richest business plan competition, where student teams from around the world compete for over US$1.5 million in prize money)
  • Openness:Prizes attract diverse groups of experts, practitioners, and laypeople- regardless of formal credentials- to attempt to solve difficult problems.” – let’s not forget the more than 300,000 people in industry, universities and government that came together to put two men on the Moon in 1969.
  • Success-contingent rewards:Prizes shift risk from prize sponsors to competitors (or their sponsors) by only paying for successful achievement of a defined goal.  No success, no prize.

 The report also adds that, “Prizes are familiar to everyone.  As children we chase after gold stars and blue ribbons; as adults, we feel a vicarious thrill watching athletes compete for medals.  The desire to compete and to celebrate victories- our own or those of others- is a part of human psychology.  At least since Homer recounted the prizes offered at the funeral games of Patroclus, humans have used prizes to spur achievement and recognize excellence..” (‘And the winner is…’ – McKinsey & Company, 2009).

The past quarter century has seen breathtaking advances in our society’s ability to communicate, collaborate and share-ideas with greater efficiency than ever before.  Prize based models for innovation are allowing us to approach many of the greatest challenges faced by humanity, creating wealth and a better world for everyone.

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